Why economists can’t reason

Reasoning is the process whereby we get from old truths to new truths, from the known to the unknown, from the accepted to the debatable … If the reasoning starts on firm ground, and if it is itself sound, then it will lead to a conclusion which we must accept, though previously, perhaps, we had not thought we should. And those are the conditions that a good argument must meet; true premises and a good inference. If either of those conditions is not met, you can’t say whether you’ve got a true conclusion or not.

Neoclassical economic theory today is in the story-telling business whereby economic theorists create make-believe analogue models of the target system – usually conceived as the real economic system. This modeling activity is considered useful and essential. Since fully-fledged experiments on a societal scale as a rule are prohibitively expensive, ethically indefensible or unmanageable, economic theorists have to substitute experimenting with something else. To understand and explain relations between different entities in the real economy the predominant strategy is to build models and make things happen in these “analogue-economy models” rather than engineering things happening in real economies.

Neoclassical economics has since long given up on the real world and contents itself with proving things about thought up worlds. Empirical evidence only plays a minor role in economic theory, where models largely function as a substitute for empirical evidence. The one-sided, almost religious, insistence on axiomatic-deductivist modeling as the only scientific activity worthy of pursuing in economics, is a scientific cul-de-sac. To have valid evidence is not enough. What economics needs is sound evidence.

Avoiding logical inconsistencies is crucial in all science. But it is not enough. Just as important is avoiding factual inconsistencies. And without showing — or at least warrantedly arguing — that the assumptions and premises of their models are in fact true, mainstream economists aren’t really reasoning, but only playing games. Formalistic deductive “Glasperlenspiel” can be very impressive and seductive. But in the realm of science it ought to be considered of little or no value to simply make claims about the model and lose sight of reality.

It seems to me that Lars starts by quoting a falsehood by Scriven, but somehow manages to reach a useful conclusion. I deduce from this that conjectures do not always have to be literally true to be useful.

The problem with Scriven is that outside pure logic and mathematics nothing can be known to be ‘true’ or ‘on sound ground’, only ‘accepted’ or ‘warranted’ by some supposed authority. Yet – as Keynes and Russell outline – we can still reason reasonably, as long as – with Boole – we accept the inevitable uncertainties and the need to check our (tentative) conclusions. This is true even when we are not aware of any ‘factual inconsistencies’.

As I’ve contended previously on this blog neoclassical economics is merely 19th century physics and the mathematics related to that badly misunderstood and misapplied to economic actions, events, and actors. And that it was envy of the great status of 19th physicists that attracted economists to take this path, and the wish to transfer to economics as much of that high status as possible. Economists had and continue have little interest in science, so long as they believe they can live off the prestige of 19th century physics and particularly the mathematics used by that physics. Imitation may be a high form of flattery but not when the imitation is self-serving, disrupts (often destroys) social life, and has no practical value in dealing with any concerns of actual groups or communities. Such imitation is both an obscenity and an attack on human life and values. But it is finally the beginning of the end for this economic-physics. People in interactions with one another and the many things and events around them make their own lives, their own government, their own science, and their own economics. Professional social scientists can be helpful, sometimes but they should not lead the process. Most economists are not helpful. Many harm the process. Unless they can demonstrate they can make a positive contribution economists should be barred from creating anything more complex than an ice cream soda. Sorry to sound so unfavorable. An upfront I apologize to those 20% of economists who are willing and able to aid these processes. And to those who study and report them honestly and fully.

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